Investors don't have a clue about using 401(k) savings, Cerulli says

Advisers and plan sponsors should implement campaigns to educate participants nearing retirement about their options

Jun 29, 2018 @ 12:14 pm

By InvestmentNews

A new study from research firm Cerulli Associates finds that most investors who have accumulated a retirement nest egg in a 401(k) plan are "clueless" about how to use the money.

When asked what they will do with their accumulated savings, one quarter of respondents explicitly answered, "I don't know," Cerulli said.

Another quarter said they "will ask my existing financial adviser for advice." Cerulli said the latter answer is probably a marginally more prepared version of "I don't know."

"In sum, this suggests that half of 401(k) plan participants have no idea what to do with the savings they have diligently set aside for retirement," Cerulli said.

The survey found that 8.5% of respondents would hire a financial adviser to help them.

For advisers specializing in the plan business, Cerulli suggests working closely with plan sponsors to identify the sponsor's preferences when it comes to retaining the assets of retired participants in the plan and ensure these preferences are reflected in the plan's available distribution options.

Advisers and sponsors also should implement targeted campaigns to plan participants approaching retirement to explain their options upon reaching retirement, Cerulli said.

Advisers generally can find many opportunities in helping clients support a thoughtful and sustainable drawdown strategy, Cerulli said.

In its study, Cerulli found that the average retirement age for men and women among 401(k) plan participants was 64.6 and 64.2, respectively.

"This is somewhat troubling given that women, on average, are expected to live almost three years longer than their male counterparts," Cerulli said, noting that given the average retirement age and average life expectancies, "Americans will need enough retirement savings to fund their living expenses for almost two decades — a daunting prospect."

(More: Guaranteed income tops boomers' retirement wish list)

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

2019 concerns keeping successful advisory firm leaders up at night

These are the greatest business challenges for next year, according to InvestmentNews' Best Practices honorees.

Latest news & opinion

Some good news about female recruitment in financial advice

Each of four core advisory positions tracked in InvestmentNews' benchmarking study has seen an uptick in women entrants.

10 ETFs that are up more than 35% this year

Amid the stock market carnage, there are still some funds posting big gains.

10 biggest HSA providers rated

Morningstar rated the largest plan providers as investment and spending vehicles.

Morningstar: DOL fiduciary rule reduces inflows to mutual funds with high loads

With the measure's demise, will the SEC's advice reform sustain the momentum?

6 tax strategies for year-end planning

How to help clients maximize their wealth using specific tax strategies before the end of the year.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print